Rugby Results and Investor Sentiment in New Zealand

31 Pages Posted: 25 Apr 2017

See all articles by Andrew Holmes-Galloway

Andrew Holmes-Galloway

Victoria University of Wellington

Mohammed Khaled

Victoria University of Wellington - School of Economics & Finance

Date Written: April 25, 2017

Abstract

This paper contributes to the existing literature on sports-related market anomalies by examining whether losses by the New Zealand national rugby team (the All Blacks) affect stock market returns in New Zealand. The novelty of this paper is in its use of a probability model to control for the ex-ante probability of a win in regression analysis, so that the economic effects of a rugby loss can separated from its cognitive effects on investors’ behaviour. The paper finds support for statistically significant effect of the probability of an All Blacks win, but, initially, not for the cognitive effect of an All Blacks loss on New Zealand stock market returns. Further robustness tests, which correct for heteroskedasticity, use different modelled probabilities and treat the effect of a draw as the same as that of a loss similarly fail to reject the hypothesis that an All Blacks loss has no effect on the investors’ trading behaviour. However, consistent with the small firm anomalies in general, tests using the small cap index offer some support.

Keywords: Rugby, Market anomaly, New Zealand, Investor sentiment, Stock returns

JEL Classification: C510, G120, Z200, Z210

Suggested Citation

Holmes-Galloway, Andrew and Khaled, Mohammed, Rugby Results and Investor Sentiment in New Zealand (April 25, 2017). Available at SSRN: https://ssrn.com/abstract=2958023 or http://dx.doi.org/10.2139/ssrn.2958023

Andrew Holmes-Galloway

Victoria University of Wellington ( email )

P.O. Box 600
Wellington, 6140
New Zealand

Mohammed Khaled (Contact Author)

Victoria University of Wellington - School of Economics & Finance ( email )

P.O. Box 600
Wellington 6001
New Zealand

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